This article was written by Jennifer Mueller, JD. Jennifer Mueller is an in-house legal expert at wikiHow. Jennifer reviews, fact-checks, and evaluates wikiHow's legal content to ensure thoroughness and accuracy. She received her JD from Indiana University Maurer School of Law in 2006.

There are 22 references cited in this article, which can be found at the bottom of the page.

If you own a family business, planning succession is something you should begin sooner rather than later. The lack of a succession plan can have significant tax implications for members of your family, and subject your managers and employees to unnecessary risk. The sooner you plan succession for your family business, the more options you have to ensure everyone's interests are protected.[1]XResearch source

Involve all stakeholders in the planning process. Your family, any other owners of your business, and your managers and employees all should be consulted as you plan succession.[2]XResearch source

Schedule several group meetings devoted to your succession plan, as well as individual meetings with key players.

Keep in mind that family members and managers will continue to play an active role in the family business, so allowing them to be actively involved in the succession plan can help smooth the transition and ensure your plan is accepted.

Draft a formal agenda for your meetings and make sure everyone stays on task. The focus should be on the succession plan, not any other problems or issues people have with some aspect of business operations or with each other.

Identify your own goals. You should have a good understanding of what you want for the business and how you define your values and your legacy.[3]XResearch source[4]XResearch source

You probably want to retire at some point, meaning you don't want to continue to be actively involved in the company for the rest of your life.

Decide the general age at which you would like to step down, and the extent to which you will remain involved with the company after that point.

You also should analyze what kind of income you want during your retirement, and what your other sources of income are. That way you can come up with a reliable estimate of how much of your retirement income should come from the business.

Keep in mind that if one of your primary goals is keeping the business in the family and having it survive as your legacy to future generations, that goal forecloses some options such as selling or liquidating the company.

Once you've identified your key goals, write them up in a summary of a page or less that you can distribute to other owners, family members, and managers.

Consider the expectations of other stakeholders. The needs and goals of your family and your managers and employees, as well as any other owners of your business, should factor into your succession plan.[5]XResearch source[6]XResearch source

Written surveys can help you evaluate the needs and expectations of others involved in the business, and allow them to explore and consider succession issues in advance of a meeting.

Take notes at each meeting so you can accurately recall issues raised. Make copies of your notes available to everyone at the meeting so they can confirm their accuracy or correct any misunderstandings.

If there are other owners of your business, it is imperative that you meet with them often to get their input on the succession plan and also ensure that they understand how their rights and interests will be affected by the transition.

Understand the difference between individual goals and collective aspirations. While each person involved in the business has their own personal hopes and desires related to their own career path and professional growth, collectively your owners and management team should have goals for the business as a whole.

Develop a best case scenario. Balance your goals and values with the expectations to others to arrive at the optimum situation you could hope to achieve through your succession plan.[7]XResearch source

Review and summarize the goals and interests of all parties involved, then identify areas of conflict.

Unify the goals of everyone involved into a consistent plan that takes all of them into account and achieves as many of them as possible. To do this, you'll have to carefully prioritize certain goals over others.

Look at the big picture rather than relationships between people to determine which goals should be prioritized over others. Where your goals conflict with someone else's, you want to avoid prioritizing your goals for no other reason than the fact that you're the boss.

Your best case scenario will include your expected annual income after retirement, a list of your business's equity and who will own how much of it, and a list of who will occupy various managerial or executive roles and what their responsibilities will be.

Explore the options available. Once you have your ideal in mind, you can evaluate different ways to get as close to that ideal plan as possible.[8]XResearch source[9]XResearch source

Your best case scenario is a unified set of goals that embody the hopes and expectations of everyone who plays a major role in your family business. However, what you still have to explore is how you will get from where you are now to where you want to be.

Keep your family dynamic in mind when you evaluate the different options, particularly if you have family members with ownership stakes in the business who do not get along with each other.

Get input from other owners, family members, and managers as well as professional advisors on a number of available options before you commit to a specific plan.

Invest in a professional valuation of your company. An objective assessment of the value of your business can help you understand the financial condition of your company and its growth potential.[10]XResearch source

Don't be surprised if you are disappointed by the valuation. A family business that you have built from scratch and poured your heart and soul into will necessarily have more value to you than it would to an independent third party.

This also is why you shouldn't skip the valuation – it is difficult if not impossible to plan succession for a family business without a realistic idea of its condition.

A qualified business appraiser also can help you assess the benefits of each succession option you're considering so you have as much information as possible to make the best decision for your business.

When you're researching appraisers, look for someone with a professional designation that indicates they have recognized education and experience in business valuation, such as a CBA (Certified Business Appraiser) or an ABV (the designation given to a certified public accountant who is accredited in business valuation).[11]XResearch source

Consider bringing in professional advisors. An experienced business attorney or accountant can help ensure that your succession plan can proceed in a way that reflects your intentions.[12]XResearch source

Professional advisors can review your business's overall picture and offer suggestions on how to best achieve your goals in light of your financial and legal realities.

As much time and effort as you've put into developing your business and planning your succession, you can't afford to have it all fall apart because there was a mistake in your legal documents. Your peace of mind in knowing that your succession plan will proceed according to your wishes is worth the cost of attorney's fees.

Create a timeline for implementation. Your timeline ideally should include benchmarks for specific goals, as well as trigger events indicating it's time to move on to the next step of the plan.[13]XResearch source

Particularly if your succession plan involves selling or gifting shares to other family members over time, you must have a schedule in place that details when those transfers will be made.

Communicate the plan to all stakeholders. Once you've designed your plan, make sure everyone who might have a role in the plan understands what will happen and what they need to do.[15]XResearch source

Create a document that summarizes your succession plan and paints a picture of what the business will look like once the transition is complete.

Meet and discuss the plan with key personnel to make sure they understand how it works and what will take place at each stage of the transition, as well as what their roles will be.

Prepare your employees for a transition in leadership. To ensure a seamless transition, succession should take place in small steps over time.[16]XResearch source[17]XResearch source

Accept input from managers and other key employees to make sure everyone understands the succession plan and is on board with it.

Keep in mind that leadership transitions are inherently unstable. Continually involving your managers and key employees in the succession process can help them feel more secure and confident staying with the company rather than being tempted to move on to a competitor they see as more stable.

You might consider offering stock options or similar incentives to keep managers invested in the company's health and growth and provide them a reason to stay through the transition.

Identify key trigger events. Managers and owners should know how to recognize when a trigger event has occurred that indicates it's time to move to the next step of the succession plan.[18]XResearch source

Keep in mind that the actual trigger events may differ from those outlined in your plan. Even the most careful planner still can't predict the future, and unforeseen changes in your business or in the general economic environment can have an effect on the succession process.

Ideally, each phase of your succession plan should take between two and six months to complete. This gives your managers and employees time to adjust to a change before additional changes are made.

Your trigger events should be well defined and easy for key personnel to identify so they can set the next phase of your plan in motion.

Groom your successor. The person you've chosen to take over after you should have plenty of experience and familiarity with the business before he or she officially takes the reins.[19]XResearch source[20]XResearch source

Assess your own skills and responsibilities as well as those of your successor. Creating a "job description" that includes a list of all the things you actually do can help familiarize your successor with your role in the company.

Consider allowing your successor to shadow you at work once or twice a week so he or she can see what you do on a daily basis.

Talk to your management team to get assistance with getting your successor ready. Find out what skills and knowledge your managers have that they can transmit to your successor.

Develop leadership and mentoring programs to provide your successor with the guidance he or she needs to grow with the company. If your successor is your child, for example, you should start training him or her to take over from childhood.[21]XResearch source

Evaluate your plan on a yearly basis. A succession plan designed several years ago may no longer fit your goals or the needs of your business.[22]XResearch source

Your plan may need to be revised to reflect changes in tax laws, business climate or conditions, or changes in personnel.

Since you have a family business, changes in the family also may impact your succession plan and necessitate revision. For example, if your son and his wife were tapped to take over when you retired, you may have to revise that plan if your son gets divorced.

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This article was written by Jennifer Mueller, JD. Jennifer Mueller is an in-house legal expert at wikiHow. Jennifer reviews, fact-checks, and evaluates wikiHow's legal content to ensure thoroughness and accuracy. She received her JD from Indiana University Maurer School of Law in 2006.